Court Tosses Creditors' Suit Against Hedge Funds

Law360, New York (July 9, 2007, 12:00 AM EDT) -- A federal appellate court on Monday ruled that the U.S. Trustee is the proper party to bring an equitable subordination claim, throwing out a request brought by unsecured creditors of former Internet company AppliedTheory Corp. to pursue a suit against a group of hedge funds.

The ruling by the U.S. Court of Appeals for the Second Circuit affirmed an order by the district court, which in turn affirmed a 2005 ruling by the U.S. Bankruptcy Court for the Southern District of New York, refusing to allow...